Legislature(2017 - 2018)GRUENBERG 120
04/17/2017 01:00 PM JUDICIARY
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SB 100-MUNICIPAL LIENS: AUTHORITY FOR & PRIORITY 1:04:14 PM CHAIR CLAMAN announced that the first order of business would be SENATE BILL NO. 100, "An Act relating to municipal liens." 1:04:46 PM SENATOR DENNIS EGAN, Alaska State Legislature, explained that he was asked by city attorneys throughout the state to introduce SB 100 because it fixes an unintended consequence of a "really good 1998 bill" wherein Senator Tim Kelley had stopped people from using bogus liens to go after elected officials and judges. At that time, he explained, no one realized it also stopped municipalities from using liens to collect against debts people owed the city. Not tax liens, he pointed out, because those are covered elsewhere in statute. Senator Egan offered that when a city runs a utility or must abate a hazard, it may need to record a lien. Importantly, he noted, these liens do not jump the line because, unlike tax liens that move in front of everyone else, these liens get in line by date only, similar to a private business. Senate Bill 100 puts the tool back into the municipalities' hands and gives liens under municipal law the same authority as state and federal law. 1:06:35 PM JESSE KIEHL, Staff, Senator Dennis Egan, Alaska State Legislature, referred to the detailed sectional analysis contained in the committee packets, and advised he was available to take any detailed questions. REPRESENTATIVE MILLETT referred to Sec. 3, [AS 29.35.010], page , lines 27-28, which read as follows: (4) to require periodic and special reports from a municipal department to be submitted through the mayor; REPRESENTATIVE MILLETT surmised that the language required a municipality to put some type of policy in place before the lien takes place. MR. KIEHL answered in the affirmative and explained that the municipality must act by ordinance; therefore, full public process comes first. Once that policy was in place, if a debt needed to be secured, it would be available but not before the policy was in place. The bill does not have a retroactive or retrospective effect, it is strictly going forward, he noted. 1:07:59 PM REPRESENTATIVE EASTMAN referred to page 4, [lines 2-10], and the different types of liens. He paraphrased line 1, "this paragraph has priority over all other liens except" and asked why this language chosen because earlier [Senator Egan] had advised that these liens are not placed in front of other liens and are in line according to date. MR. KIEHL responded that this priority language was copied from elsewhere in the state's lien statute and that there are many different flavors of lien in statute. When working through this logic chain, the result is what Senator Egan described, these liens are in line on equal terms with everyone else. He said he could walk through that in a couple of pieces, but this is existing statute language that has that effect, it places these liens basically in front of everything that isn't in front of these liens. It is interesting language, but that is its net effect, he remarked. 1:09:50 PM REPRESENTATIVE EASTMAN asked the sponsor's thoughts about including a proviso in the language on page 3, wherein under this bill, if the state does give municipalities the opportunity to have liens, that there be required "a sort of opt-out" [provision]. For example, an Alaska resident preferring to rely entirely on clean energy or sustainable power could opt-out of a particular utility. In that manner, he said, the resident would not use that utility and would not run the risk of a lien being placed on their property for not paying for a utility they were not using. MR. KIEHL answered that the bill is fundamentally a local control bill, and the question of whether any given municipality has mandatory use of its utilities, assuming a municipality runs the utilities, is actually an issue best left to that municipality and its voters to decide. Home rule municipalities, he explained, under its home rule powers could require hook-up to a utility. Currently, there is a statute elsewhere allowing t any municipality to have mandatory garbage service, not all municipalities use that option which is something between those municipalities and their voters to determine on a local level. 1:11:36 PM CHAIR CLAMAN opened public testimony on SB 100. 1:12:06 PM AMY MEAD, Municipal Attorney, City and Borough of Juneau, offered an example of why this bill would be useful to municipalities, such that, in 2012, a large historic structure burned in downtown Juneau. Within a few days the building official declared the building a public nuisance and issued an order requiring the property owners to perform certain repairs. The property owners failed to comply, the building sat for three years, and a second fire occurred in March 2015. The City and Borough of Juneau (CBJ) official who inspected the building found that the property had significantly deteriorated. In May 2015, he declared the building had deteriorated to the point it was a public hazard and needed to it be demolished, and required that the property owners demolish the building. Consequently, she explained, the property owners failed to comply with that order and the CBJ demolished the building at a cost of over $1.6 million. She pointed out that the CBJ had previously adopted the International Property Management Code allowing a municipality to abate a public nuisance at the owners' expense. Unfortunately, due to current state law, the CBJ could not secure that debt with a lien, meaning that a prospective buyer of that now flat piece of buildable property would have no notice of the debt the CBJ incurred in abating the public nuisance despite the fact it was a legally permissible debt. Ms. Mead described that similar to a municipality that provides for utility services, the CBJ had no way of using that placeholder to secure its place in line if that property were to be sold. Consequently, the CBJ had to file a lawsuit for the right to recover those funds, and this legislation would have provided an avenue for the CBJ to secure its right in line should the property have been sold. Ms. Mead advised that a municipality is not allowed to immediately foreclose on that debt so the property owner would still have another process to object to the foreclosure, and object to the placement of the lien. 1:14:35 PM REPRESENTATIVE MILLETT surmised that the demolished property was still being held by the private owner of the building, and asked why there was a legal avenue for the CBJ to force the property owner to sell the property allowing the CBJ to receive payment of the debt. MS. MEAD responded that the CBJ initiated a lis pendens, a notice of the lawsuit, to recover those costs because it could not file a lien. Subsequent to the CBJ recording the lis pendens, there was an objection to that recording, and the court ordered the CBJ to withdraw the lis pendens. Consequently, she advised, in the event the property owner decided today to try to sell that property there would be no manner in which the title search would uncover the [$1.6 million] debt. She remarked that the CBJ has been engaged in that lawsuit for one year and it would probably be close to another year before the case was resolved and hopefully, she expressed, the CBJ will ultimately recover that debt. Initially and ironically, the defendants filed a Motion to Dismiss arguing that the CBJ should simply file a lien to secure the debt, and of course, the CBJ was prohibited to filing a lien due to current state law, she pointed out. 1:16:04 PM REPRESENTATIVE LEDOUX asked upon what grounds the court ordered the CBJ to withdraw the lis pendens. MS. MEAD responded that the court ordered that the title to the property was not at issue and not at stake; therefore, the lis pendens was not an appropriate mechanism. 1:16:58 PM WILLIAM D. FALSEY, Municipal Attorney, Municipality of Anchorage, advised that during the Anchorage Assembly's official legislative program [meeting] a priority items was the issue of changes to state law state law restoring the traditionally understood ability of municipalities to protect their law abiding citizens and taxpayers by recording liens. He offered that SB 100 would accomplish that goal and the Municipality of Anchorage transmitted letters of support. He explained that in some ways this is a clean-up measure designed to address an overdue maintenance and plumbing problem with the way "our government is structured" that is coming out of a well-intended fix to an entirely different problem in the 1990s. He explained that Anchorage had an instance of several citizens not entirely happy with its public officials filing liens against their personal property "so something like 43 liens have been filed against the mayor and every Anch -- every member of the Anchorage Assembly." To its credit, the legislature corrected that problem but did so in a manner that swept up the municipal liens within its ambit. Moving forward to 2012, the Alaska Supreme Court found that another jurisdiction could not record a lien to secure its unpaid utility bills. He added that it would be somewhat surprising for the legislature to leave municipalities out of the lien framework because in thumbing through Title 34.35, the legislature had authorize a whole bevy of liens to be filed by a whole variety of characters including, mechanics, those who are performing services on mines and oil wells, common carriers, folks performing private property storage, cattle grazers, fish packers, fish processors, fishermen, attorneys, hospitals, physicians and nurses, hotels and boarding rooms, lumberjacks and those who work with other timber operations, common labors of all stripes for their wages, and even night watchman. 1:19:30 PM CHAIR CLAMAN, after ascertaining no one wished to testify, closed public testimony on SB 100. 1:19:59 PM VICE CHAIR FANSLER thanked Senator Egan for bringing this legislation forward because it cleans up an issue that offered true unintended consequences and hurt the state's municipalities. He commented that anything the legislature could to do help municipalities help themselves is a good thing and this bill squarely accomplishes that goal. He said he supports SB 100. 1:20:26 PM REPRESENTATIVE EASTMAN commented that he would like time to draft an amendment related to his earlier, opt-out provision before placing a lien on someone's property, suggestion. The sponsor statement specifically referred to municipalities using a means to collect from people who use services but do not pay, which is fair. His concern, he said, is that municipalities may use this to force people to pay and possibly give up their property for services the people never intended to use. CHAIR CLAMAN pointed out to Representative Eastman that his office had forwarded a notice on Saturday that amendments for this bill were due at 10:00 this morning. While, he said, he appreciates Representative Eastman's interest, he would not hold the bill another day to take amendments. 1:21:30 PM REPRESENTATIVE LEDOUX remarked she did not understand Representative Eastman's request because, what person would opt- in to a lien. In the event a person was faced with a lien because they failed to pay for something, they would not agree to a lien being issued on their property. REPRESENTATIVE EASTMAN explained that currently, a person has an opportunity to use utility services from a municipality, except not everyone uses sewage services and in some places it is not even an option. The opt-out provision, he explained, would allow Alaskans not using and never plan to use, a way to prevent a lien being placed on their property for utilities they are not using. He noted this was the first committee hearing on this bill and there hadn't been an opportunity for discussion on this topic. 1:23:14 PM CHAIR CLAMAN surmised that Representative Eastman's concern was to prevent a lien being put on their property for utilities a person didn't use, similar to a mechanic's lien or timber lien, except a utility would not issue a lien if the person did not actually use the utility. Therefore, he said, if the utility delivered electricity for two months and a person advised they did not want to use the electricity any longer and would not pay for the past two months, that instance would be appropriate to issue a lien to collect the two months of provided electricity. 1:24:06 PM REPRESENTATIVE FANSLER moved to report SB 100, Version 30- LS0709\J, out of committee with individual recommendations and the accompanying zero fiscal note. REPRESENTATIVE EASTMAN objected. A roll call vote was taken. Representatives Kreiss-Tomkins, LeDoux, Fansler, Millett, and Claman voted in favor of the passage of SB 100. Representative Eastman voted against it. Therefore, SB 100 was reported out of the House Judiciary Standing Committee by a vote of 5-1.